Get ready to be your own boss: top business tips for freelancers

My first freelance job came while I was in college, in 1995. A friend told me that a local bookstore was looking for someone to build a website, and that they’d referred me, and I should call them. I called, had a great conversation, and we agreed to meet. At the end of the meeting I had agreed to build them a website that met their needs, we shook hands, and that evening I started coding. Fortunately for me everything went well. They loved the site and paid promptly upon delivery.

I’ve been freelancing ever since; sometimes full time, sometimes on the side. I’ve been fortunate to have never really been burned, but I have found some things that make life a lot easier. Here are my suggestions when you’re ready to be your own boss.

Get an LLC or incorporate

There are several reasons for this. One is legal protection. If you’re doing business under an LLC, and the client sues, they can only sue the company. This means that if you lose and the worst happens, they could wipe out your company, but they can’t take your house, your car, or any other personal possessions.

Another reason is financial. Companies are taxed quite differently from people, and you’ll keep a lot more money in your pocket if your income is run through a company.

Get a lawyer

It’s cheap and easy these days to set up your own LLC, but it’s also very easy to do it wrong, which could allow a hostile lawyer to run circles around it. If you do it yourself you’ll always wonder if you did it right, and you won’t find out until it’s tested.

If you have a lawyer do it, it might cost several hundred dollars, but you’ll know it’s done properly. It’s also quite possible they’ll think of things you have not, that could bring advantage to your company.

Get a business bank account

If you use your personal bank account with your LLC then the line between personal and business finances gets very blurred, and you could easily lose any tax advantage or legal protection an LLC is supposed to provide. Check with the bank you use now, but also shop around. Business bank accounts have different fees than personal ones, and can often have some unique perks. I know several people who have their personal finances in one bank, and business finances in another bank.

A business bank account solves far more headaches than you can image, or I have time to list here.

Get paid through your business

Set up a payroll system with your new business bank account. There are services that can help with this, or you can do it manually. This means taxes will be taken out properly, just like having a “real” job. The ideal of course is to have the business make more money than you need to be paid each month, so your business bank account will build up a reserve. There are other tax reasons for this as well.

Spend through your business

Say you need a new laptop, or you need to go to a conference. Have the business pay for it, and your tax advantages will be much greater than if you simply bought with your own money and called it a deduction. Remember, business taxes are DIFFERENT.

Get a tax preparer

Once you start doing more than a little business, taxes get complicated very quickly. Audits are miserable, but audits where you did your own taxes without fully understanding them are TERRIBLE.

When a professional does your taxes you have far more confidence that they’re done right, and most tax preparers have a clause that says they go with you to an audit to explain what was done and why.

Get business cards

In every job I’ve ever had I was given about 100 business cards. Out of all of those jobs combined I gave out about seven cards. Still I’ll say: get some. For one thing I probably should have given out a lot more, but a surprising reason is that they lend legal legitimacy to your company.

Business cards are a common, reassuring business move.

Practically speaking, instead of giving out those cards, suggest people photograph them with their cell phones. You may also suggest they photograph you to associate with the card photo, so they remember you better.

Use contracts

If you’ve come this far, taking the above steps to protect your company, have your clients sign a contract for work. Without a contract they can easily sue, or refuse to pay.

Contracts also help prevent scope creep. They require YOU to do the proper work of defining the work, and allow you to easily charge extra for extra work.

Lawyers can also help you create a boilerplate contract. Ask around your community, or even an online community you trust to find a lawyer who understands development contracts. All the same reasons for getting a tax preparer or LLC lawyer apply. Confidence in the contract and support if you get in trouble.

Ready to be your own boss?

The advice I’ve provided here has two purposes: legal security and making life easier. On a daily basis, legal security is nice, but I tend to forget about it. The easier life, however, is something I notice every day. If your business becomes an uncomfortable chore you’ll struggle to do it properly and you’ll get in trouble easily. If you can streamline the uncomfortable parts, and get back to doing what you love, you’ll always remember why you started this adventure in the first place.

The above content should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

Topher is a WordPress developer currently writing documentation for Easy Digital Downloads. He lives in Grand Rapids, MI, with his wife, two daughters and two dogs. Topher is also the maintainer of the HeroPress project at http://heropress.com. Find him on Twitter @topher1kenobe or at his blog, http://topher1kenobe.com.

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